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Facts
The assessee declared agricultural income from a recently purchased farm. The PCIT initiated revision proceedings under Section 263, holding the assessment order erroneous and prejudicial to the revenue, primarily due to alleged lack of inquiry regarding the agricultural income claim.
Held
The Tribunal held that the Assessing Officer had made sufficient inquiries and the assessee had provided adequate documentation to support the agricultural income claim. The PCIT's finding of inadequate inquiry was found to be factually untenable.
Key Issues
Whether the PCIT was justified in invoking Section 263 to revise the assessment order based on allegations of inadequate inquiry by the Assessing Officer regarding agricultural income.
Sections Cited
263, 143(3), 2(1A), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
This appeal by the assessee is directed against revision order dated 28.03.2025 passed by the Ld. Commissioner of Income-tax, Mumbai-41 [in short ‘the Ld. PCIT’] for assessment year 2020-21, whereby the assessment order passed by the assessment unit Income-tax Department for A.Y. 2020-21 was held to be erroneous in so far as it was prej in so far as it was prejudicial in the interest of the Revenue. The udicial in the interest of the Revenue. The grounds raised by the assessee are reproduced as under: grounds raised by the assessee are reproduced as under: grounds raised by the assessee are reproduced as under:
1. The Ld. PCIT erred in passing order u/s 263 of the 1. The Ld. PCIT erred in passing order u/s 263 of the Income Tax Act, Income Tax Act, 1961.
2. The Ld. PCIT erred in passing order u/s 263 without considering
2. The Ld. PCIT erred in passing order u/s 263 without considering
2. The Ld. PCIT erred in passing order u/s 263 without considering facts & circumstances of the case & without giving reasonable facts & circumstances of the case & without giving reasonable facts & circumstances of the case & without giving reasonable opportunity to the appellant. opportunity to the appellant.
3. The appellant craves your honours leave to add to amend or to 3. The appellant craves your honours leave to add to amend or to 3. The appellant craves your honours leave to add to amend or to withdraw any of the above grounds of appeal on or before final any of the above grounds of appeal on or before final any of the above grounds of appeal on or before final hearing.”
2. Briefly stated, facts of the case are that the assessee facts of the case are that the assessee filed its facts of the case are that the assessee return of income on return of income on 13.02.2021 declaring total income of Rs. declaring total income of Rs. 1,41,39,170/-. The return of income . The return of income filed by the by the assessee was selected for limited scrutiny on the issue of agriculture income and selected for limited scrutiny on the issue of agriculture income and selected for limited scrutiny on the issue of agriculture income and credit of brought forward tax deducted at source. Accordingly credit of brought forward tax deducted at source. Accordingly credit of brought forward tax deducted at source. Accordingly statutorily notices under the Income tax Act, 1961 ( in short ‘the statutorily notices under the Income tax Act, 1961 ( in short ‘the statutorily notices under the Income tax Act, 1961 ( in short ‘the Act’) were issued and complied and assessment u/s 143 ct’) were issued and complied and assessment u/s 143 ct’) were issued and complied and assessment u/s 143(3) of the Act was completed on 25.08.2022 Act was completed on 25.08.2022 wherein income declared in wherein income declared in return of income was accepted. Subsequently Ld. PCIT called for the return of income was accepted. Subsequently Ld. PCIT called for the return of income was accepted. Subsequently Ld. PCIT called for the assessment record and and after examination he was of the view that after examination he was of the view that assessing officer did not examine did not examine the issue of agricul issue of agricultural income and omission has resulted in under and omission has resulted in under-assessment of income. assessment of income. Accordingly, the Ld. PCIT issued notice u/s 263 of the Income Tax the Ld. PCIT issued notice u/s 263 of the Income Tax the Ld. PCIT issued notice u/s 263 of the Income Tax Act asking the assessee as why the asking the assessee as why the assessment order assessment order might not be held as erroneous in held as erroneous in so far as prejudicial to the to the interest of the revenue. The assessee submitted that the Assessing O he assessee submitted that the Assessing O he assessee submitted that the Assessing Officer had made complete enquiry on the issue of agriculture income and made complete enquiry on the issue of agriculture income and made complete enquiry on the issue of agriculture income and therefore order of the assessing officer is sustainable in law but the therefore order of the assessing officer is sustainable in law but the therefore order of the assessing officer is sustainable in law but the Ld. PCIT rejected the contention of the assessee a Ld. PCIT rejected the contention of the assessee and held nd held the order as erroneous in so far as erroneous in so far as prejudicial to the interest of the revenue prejudicial to the interest of the revenue for the reasons, firstly firstly, no document in respect of o document in respect of details of land was filed before the assessing officer, secondly, no cultivation was was filed before the assessing officer, o cultivation was done by assessee, thirdly thirdly, payment made to two persons payment made to two persons for labour work was made efore the registration and therefore cannot be efore the registration and therefore cannot be efore the registration and therefore cannot be established that those paym established that those payment were for maintenance of ‘ready maintenance of ‘ready farm’, fourthly, certificate of agriculture income of last three years certificate of agriculture income of last three years certificate of agriculture income of last three years from jurisdictional Te from jurisdictional Tehsildar was not filed. The Ld. PCIT accordingly not filed. The Ld. PCIT accordingly setaside the order of the A der of the Assessing officer with the direction to carry ssessing officer with the direction to carry out verification as directed in the order u/s 263 directed in the order u/s 263 of the Act. The relevant findings of the PCIT is reproduced as under: relevant findings of the PCIT is reproduced as under: relevant findings of the PCIT is reproduced as under: “5. The submissi “5. The submission of the assessee is considered and is found not on of the assessee is considered and is found not tenable for following reason: tenable for following reason: (i) The assessee claimed to have purchased agriculture The assessee claimed to have purchased agriculture The assessee claimed to have purchased agriculture land between 26 August 2019 to 11 September 2019 as land between 26 August 2019 to 11 September 2019 as land between 26 August 2019 to 11 September 2019 as 'ready farm of vegetables mainly Ginger & Tomato and got 'ready farm of vegetables mainly Ginger & Tomato and got 'ready farm of vegetables mainly Ginger & Tomato and got into an understanding with local farmers to maintain the understanding with local farmers to maintain the understanding with local farmers to maintain the farm for Rs.2,00,000/ farm for Rs.2,00,000/-. However, assessee submitted only . However, assessee submitted only index-1 & 2 of the land registration document wherein in no 1 & 2 of the land registration document wherein in no 1 & 2 of the land registration document wherein in no such details about land is mentioned and no other document such details about land is mentioned and no other document such details about land is mentioned and no other document was produced to sustaintiate su was produced to sustaintiate such undertaking. (ii) The assessee during assessment proceeding have claimed (ii) The assessee during assessment proceeding have claimed (ii) The assessee during assessment proceeding have claimed only wage expense of Rs. 2,00,000/ only wage expense of Rs. 2,00,000/- out of total sale out of total sale proceeds of Rs.34,43,680/ proceeds of Rs.34,43,680/-. No other expenses, such as cost . No other expenses, such as cost of seeds fertilizers, powers, warehousing cost transportation of seeds fertilizers, powers, warehousing cost transportation of seeds fertilizers, powers, warehousing cost transportation cost etc, are claimed. Further, these expenses are paid to two etc, are claimed. Further, these expenses are paid to two etc, are claimed. Further, these expenses are paid to two persons, namely Mr. Prabhakar Shelke & Mr. Kaluram and persons, namely Mr. Prabhakar Shelke & Mr. Kaluram and persons, namely Mr. Prabhakar Shelke & Mr. Kaluram and the same were paid before registration of land and therefore the same were paid before registration of land and therefore the same were paid before registration of land and therefore it can't be established as payment towards maintenance of it can't be established as payment towards maintenance of it can't be established as payment towards maintenance of 'ready farm' which were 'ready farm' which were not yet owned. (iii) Since assessee claims to have purchased ready farm of (iii) Since assessee claims to have purchased ready farm of (iii) Since assessee claims to have purchased ready farm of vegetables it cannot be said that assessee had cultivated the vegetables it cannot be said that assessee had cultivated the vegetables it cannot be said that assessee had cultivated the produce and hence not falls in the ambit of provision of produce and hence not falls in the ambit of provision of produce and hence not falls in the ambit of provision of section 2(1A) of the Act. section 2(1A) of the Act. (iv) The assessee has not submitted (iv) The assessee has not submitted any 'certificate of any 'certificate of agriculture income of last three Revenue years from agriculture income of last three Revenue years from agriculture income of last three Revenue years from jurisdictional Tehsildar, The income of Rs.34,43,680/- from jurisdictional Tehsildar, The income of Rs.34,43,680/ jurisdictional Tehsildar, The income of Rs.34,43,680/ 9.8 acre of rain fed land in only half the Revenue year is 9.8 acre of rain fed land in only half the Revenue year is 9.8 acre of rain fed land in only half the Revenue year is unusually high and there is no document in support of such unusually high and there is no document in support of such unusually high and there is no document in support of such high yield by the assessee. Sale receipts in Bazar Samiti only yield by the assessee. Sale receipts in Bazar Samiti only yield by the assessee. Sale receipts in Bazar Samiti only certify sale, it doesn't certify agriculture by the assessee. certify sale, it doesn't certify agriculture by the assessee. certify sale, it doesn't certify agriculture by the assessee.
6. From above fact it is clear that assessee is not fulfilling the 6. From above fact it is clear that assessee is not fulfilling the 6. From above fact it is clear that assessee is not fulfilling the conditions to claim exemption of agriculture income and is conditions to claim exemption of agriculture income and is conditions to claim exemption of agriculture income and is disallowable u/s.2(1A) of the Act. disallowable u/s.2(1A) of the Act.
7. As discussed above and as per the provisions of section 263 of 7. As discussed above and as per the provisions of section 263 of 7. As discussed above and as per the provisions of section 263 of the Income Tax Act, I hereby set aside the impugned assessment the Income Tax Act, I hereby set aside the impugned assessment the Income Tax Act, I hereby set aside the impugned assessment order dated 25.08.2022 with a direction to the Assessing Officer order dated 25.08.2022 with a direction to the Assessing Officer order dated 25.08.2022 with a direction to the Assessing Officer to carry out due verificat to carry out due verification, as mentioned above and thereafter ion, as mentioned above and thereafter pass fresh assessment order after considering the issues and pass fresh assessment order after considering the issues and pass fresh assessment order after considering the issues and factual submission made by the assessee. Needless to state, the factual submission made by the assessee. Needless to state, the factual submission made by the assessee. Needless to state, the Assessing Officer shall give the assessee reasonable opportunity Assessing Officer shall give the assessee reasonable opportunity Assessing Officer shall give the assessee reasonable opportunity of being heard and pass a s of being heard and pass a speaking order after taking into peaking order after taking into consideration the explanation and supporting evidence submitted consideration the explanation and supporting evidence submitted consideration the explanation and supporting evidence submitted by the assessee.” by the assessee.”
3. Before us the Ld. counsel for the assessee filed a paper book Ld. counsel for the assessee filed a paper book Ld. counsel for the assessee filed a paper book containing pages 1-79 and 1 79 and 1-19.
4. Before us ld. counsel for the assessee Before us ld. counsel for the assessee referred to page No. 4 of referred to page No. 4 of the paper book containing 1 the paper book containing 19 pages and submitted that the 9 pages and submitted that the Assessing officer had made details enquiry in ssessing officer had made details enquiry in respect of the agriculture income. He He further referred to paper book page No. 11 to paper book page No. 11- 13 and submitted that the assessee had filed 13 and submitted that the assessee had filed detailed explanation detailed explanation on the queries raised by A raised by Assessing officer on the issue of agriculture ssessing officer on the issue of agriculture income. Ld. counsel s income. Ld. counsel specifically submitted that the agriculture l submitted that the agriculture land in question has been purchased by in question has been purchased by way of the registered sale of the registered sale agreement. He submitted submitted that the assessee was in the proce assessee was in the process of negotiation of the purchase of the purchase at the time of particular at the time of particular crop of Ginger & Tomato were sown in the agricultural field & Tomato were sown in the agricultural field ( i.e. small plants) ( i.e. small plants) and immediately thereafter the assessee purchased the said agricultural immediately thereafter the assessee purchased the said agricultural immediately thereafter the assessee purchased the said agricultural land and paid the amount of Rs. 2,00,000/ amount of Rs. 2,00,000/- to two farmers to two farmers from whom land was purchased for maintenance of the crop. According whom land was purchased for maintenance of the crop. According whom land was purchased for maintenance of the crop. According to the Ld. Counsel, the said farmers were paid for labour charges the said farmers were paid for labour charges the said farmers were paid for labour charges for maintaining the crop. The Ld. counsel submitted that the initial for maintaining the crop. The Ld. counsel submitted that t for maintaining the crop. The Ld. counsel submitted that t cheque of Rs. 2,00,000/ . 2,00,000/- were paid as advance of purchase of the as advance of purchase of the land. However, subsequently the entire payment was made to two land. However, subsequently the entire payment was made to two land. However, subsequently the entire payment was made to two famers and therefore the advance cheque and therefore the advance cheque was adjusted against was adjusted against labour charges for maintenance of crop for maintenance of crop. Thus, according to the Ld. according to the Ld. counsel the land was cultivated by the assessee using the land was cultivated by the assessee using the hired land was cultivated by the assessee using the services of the labour of those two farmers. The Ld. counsel further services of the labour of those two farmers. The Ld. counsel further services of the labour of those two farmers. The Ld. counsel further submitted that all details including evidence in support of the all details including evidence in support of the all details including evidence in support of the ownership of the land ownership of the land were filed before the assessing officer filed before the assessing officer. Regarding the finding of the Ld. PCIT the finding of the Ld. PCIT of not providing details of the of not providing details of the last three years agriculture income, t three years agriculture income, the Ld. counsel referred to the he Ld. counsel referred to the submission of the assessee filed before the assessing officer that submission of the assessee filed before the assessing officer submission of the assessee filed before the assessing officer since assessee had purchased land since assessee had purchased land in the year under consi in the year under consideration, therefore assessee was not in the position to give details of the herefore assessee was not in the position to give details of the herefore assessee was not in the position to give details of the agriculture income of the last three years of the earlier owners. Ld. agriculture income of the last three years of the earlier owners. Ld. agriculture income of the last three years of the earlier owners. Ld. Counsel submitted that Ld. PCIT submitted that Ld. PCIT has understood the ready fa has understood the ready farm wrongly. According to him ccording to him, majority of the process of cultivation has , majority of the process of cultivation has been carried out by the assessee using hired labourers. Ld. counsel been carried out by the assessee using hired labourers. been carried out by the assessee using hired labourers.
submitted that there is submitted that there is no error in the order of the Ld.AO and he no error in the order of the Ld.AO and he had made all enquires on issue and dispute and therefore order of had made all enquires on issue and dispute and therefore order of had made all enquires on issue and dispute and therefore order of the Ld. PCIT needs to be setaside. On the other hand Ld. T needs to be setaside. On the other hand Ld. T needs to be setaside. On the other hand Ld. DR relieved on the order of the Ld. PCIT. relieved on the order of the Ld. PCIT.
We have heard the rival submissions advanced on behalf of both We have heard the rival submissions advanced on behalf of both We have heard the rival submissions advanced on behalf of both parties and carefully perused the material available on record, parties and carefully perused the material available on record, parties and carefully perused the material available on record, including the orders passed by the low including the orders passed by the lower authorities. The case was er authorities. The case was selected for scrutiny with the specific objective of examining the selected for scrutiny with the specific objective of examining the selected for scrutiny with the specific objective of examining the agricultural income declared by the assessee. In the revisional agricultural income declared by the assessee. In the revisional agricultural income declared by the assessee. In the revisional proceedings initiated under Section 263 of the Act, the Learned proceedings initiated under Section 263 of the Act, the Learned proceedings initiated under Section 263 of the Act, the Learned PCIT held that the assessment or PCIT held that the assessment order passed by the Assessing der passed by the Assessing Officer was both erroneous and prejudicial to the interests of the Officer was both erroneous and prejudicial to the interests of the Officer was both erroneous and prejudicial to the interests of the Revenue. The basis for such a finding was twofold: firstly, that the Revenue. The basis for such a finding was twofold: firstly, that the Revenue. The basis for such a finding was twofold: firstly, that the Assessing Officer failed to make requisite inquiries with respect to Assessing Officer failed to make requisite inquiries with respect to Assessing Officer failed to make requisite inquiries with respect to the claim of agricultur the claim of agricultural income; and secondly, that the claim was al income; and secondly, that the claim was erroneously accepted without proper verification. erroneously accepted without proper verification.
5.1 Insofar as the allegation of lack of inquiry by the Assessing Insofar as the allegation of lack of inquiry by the Assessing Insofar as the allegation of lack of inquiry by the Assessing Officer is concerned, a perusal of the notice issued under Section Officer is concerned, a perusal of the notice issued under Section Officer is concerned, a perusal of the notice issued under Section 142(1) of the Act dated 06.1 142(1) of the Act dated 06.11.2021 reveals that the Assessing 1.2021 reveals that the Assessing Officer had raised extensive and specific queries pertaining to the Officer had raised extensive and specific queries pertaining to the Officer had raised extensive and specific queries pertaining to the assessee’s claim of agricult assessee’s claim of agricultural income. The queries, ural income. The queries, inter-alia, sought information regarding: sought information regarding:
the nature and type of agricultural activities undertaken; the nature and type of agricultural activities undertaken; the nature and type of agricultural activities undertaken;
ownership and location details of the agricultural land; ownership and location details of the agricultural land; ownership and location details of the agricultural land; irrigation facilities; irrigation facilities; sale proceeds of the agricultural produce, along with sale proceeds of the agricultural produce, along with sale proceeds of the agricultural produce, along with confirmation from the purchasers; confirmation from the purchasers; evidences of expenses incurred, including labour charges, evidences of expenses incurred, including labour charges, evidences of expenses incurred, including labour charges, inputs, and transport; inputs, and transport; documentary proof in respect of source of investment in the ntary proof in respect of source of investment in the ntary proof in respect of source of investment in the land, and reasons for the substantial increase in agricultural income in reasons for the substantial increase in agricultural income in reasons for the substantial increase in agricultural income in the relevant year. the relevant year.
5.2 On a holistic reading of the questionnaire issued by the On a holistic reading of the questionnaire issued by the On a holistic reading of the questionnaire issued by the Assessing Officer, it is evident that the inquiry was neither Assessing Officer, it is evident that the inquiry Assessing Officer, it is evident that the inquiry superficial nor perfunctory. On the contrary, it covered all material superficial nor perfunctory. On the contrary, it covered all material superficial nor perfunctory. On the contrary, it covered all material aspects relevant to the issue in question. aspects relevant to the issue in question. We find that assessing find that assessing officer duly asked the assessee to provide details of the agriculture the assessee to provide details of the agriculture the assessee to provide details of the agriculture income of last three assessment year income of last three assessment years. Similarly the Ld.AO ask s. Similarly the Ld.AO asked for all details of ownership for all details of ownership of the agricultural land of the agricultural land ; kind of crops; documentary evidence in support of the sale of the agriculture documentary evidence in support of the sale of the agriculture documentary evidence in support of the sale of the agriculture produce; evidence in support of evidence in support of purchase of the seeds; purchase of the seeds; labour charges and other expenses charges and other expenses etc. In our opinion Ld.AO raised all the Ld.AO raised all the enquires on the issue which ought to have been made by the Ld.AO. enquires on the issue which ought to have been made by the Ld.AO. enquires on the issue which ought to have been made by the Ld.AO.
5.3 Those enquires raised by the assessing officer was duly Those enquires raised by the assessing officer was duly Those enquires raised by the assessing officer was duly responded by the assessee responded by the assessee. The relevant detailed submission of the . The relevant detailed submission of the assessee is reproduced as is reproduced as under:-
“D. With respect agriculture income during the year consideration, “D. With respect agriculture income during the year consideration, “D. With respect agriculture income during the year consideration, we are submitting following details as required by your good self. we are submitting following details as required by your good self. we are submitting following details as required by your good self.
Our agricultural income is through sales of vegetables mainly Our agricultural income is through sales of vegetables mainly Our agricultural income is through sales of vegetables mainly ginger and tomato. We have taken up ready farm of vegetables ginger and tomato. We have taken up ready farm of ginger and tomato. We have taken up ready farm of mainly ginger and tomato. We got into an understanding with the mainly ginger and tomato. We got into an understanding with the mainly ginger and tomato. We got into an understanding with the local farmers (2 of them) from whom we have purchased these local farmers (2 of them) from whom we have purchased these local farmers (2 of them) from whom we have purchased these lands since they had the knowhow and technical knowledge of lands since they had the knowhow and technical knowledge of lands since they had the knowhow and technical knowledge of farming. For the first year they would maintain the farm for an farming. For the first year they would maintain the farm for farming. For the first year they would maintain the farm for agreed amount of Rs.200000 until the produce is ready for agreed amount of Rs.200000 until the produce is ready for agreed amount of Rs.200000 until the produce is ready for harvesting.
Measurement of the total land is 9.875 acres. Measurement of the total land is 9.875 acres.
The agricultural land is owned land. The agricultural land is owned land.
The land is rain fed and has small rain fed water pond and 2 The land is rain fed and has small rain fed water pond and 2 The land is rain fed and has small rain fed water pond and 2 hand pumps. There is a 27 acre lake of hand pumps. There is a 27 acre lake of irrigation department irrigation department within 2 km radius and the famous Ulhas river within 1.5 km of within 2 km radius and the famous Ulhas river within 1.5 km of within 2 km radius and the famous Ulhas river within 1.5 km of our property. However currently our requirement is fulfilled by our property. However currently our requirement is fulfilled by our property. However currently our requirement is fulfilled by internal sources only. internal sources only.
5. The land is situated in Raigad District, Pin code The land is situated in Raigad District, Pin code-410201. 410201.
6. Details of agricultural sa Details of agricultural sale proceeds received as per the format le proceeds received as per the format provided by your good self is enclosed herewith. (Annexure-2). provided by your good self is enclosed herewith. (Annexure provided by your good self is enclosed herewith. (Annexure 7. We would like to state that entire payment towards agriculture We would like to state that entire payment towards agriculture We would like to state that entire payment towards agriculture sale proceeds are received in bank. Bank statements highlighting sale proceeds are received in bank. Bank statements highlighting sale proceeds are received in bank. Bank statements highlighting payment received are enclo payment received are enclosed herewith. (Annexure-3) 3) 8. There was no any outstanding amount towards sale of agriculture There was no any outstanding amount towards sale of agriculture There was no any outstanding amount towards sale of agriculture proceeds as on 31.03.2020. proceeds as on 31.03.2020.
We have sold agriculture proceed to registered BMC license We have sold agriculture proceed to registered BMC license We have sold agriculture proceed to registered BMC license holders. Proof of receipt of agriculture proceeds are enclosed holders. Proof of receipt of agriculture proceeds are enclosed holders. Proof of receipt of agriculture proceeds are enclosed herewith. (Annex herewith. (Annexure-4) 10. As mentioned above, we have taken up ready farm with readily As mentioned above, we have taken up ready farm with readily As mentioned above, we have taken up ready farm with readily grown vegetables mainly ginger and tomato and got into an grown vegetables mainly ginger and tomato and got into an grown vegetables mainly ginger and tomato and got into an understanding with the farmers from whom we had purchased understanding with the farmers from whom we had purchased understanding with the farmers from whom we had purchased the land since they had the knowhow and technical knowledge of the land since they had the knowhow and technical knowledge of the land since they had the knowhow and technical knowledge of farming that for the first year we pay them Rs.200000/ hat for the first year we pay them Rs.200000/ hat for the first year we pay them Rs.200000/- to maintain the farm until the produce is ready for harvesting. Proof maintain the farm until the produce is ready for harvesting. Proof maintain the farm until the produce is ready for harvesting. Proof of payment made of of payment made of Rs.200000/- to farmer from whom we have to farmer from whom we have purchased agriculture land are enclosed herewith. (Annexure-5) purchased agriculture land are enclosed herewith. (Annexure purchased agriculture land are enclosed herewith. (Annexure Produced sale pro Produced sale process was again outsourced and the vendors cess was again outsourced and the vendors who are licensed in municipal market arranged pickup from our who are licensed in municipal market arranged pickup from our who are licensed in municipal market arranged pickup from our Karjat farm and also the harvest labour as mentioned in their Karjat farm and also the harvest labour as mentioned in their Karjat farm and also the harvest labour as mentioned in their receipts in Annexure receipts in Annexure-4. All travelling and transportation expenses 4. All travelling and transportation expenses have been deducted and have been deducted and only net amount has been paid to us. only net amount has been paid to us.
We have purchased agriculture land in the year under We have purchased agriculture land in the year under We have purchased agriculture land in the year under reference. This is the first year of agriculture income. Details of reference. This is the first year of agriculture income. Details of reference. This is the first year of agriculture income. Details of payment made towards purchase of agriculture land along with payment made towards purchase of agriculture land along with payment made towards purchase of agriculture land along with its sources of investment are enc its sources of investment are enclosed herewith. (Annexure losed herewith. (Annexure-6) 12. Total income during the financial year 2019 12. Total income during the financial year 2019-2020 includes 2020 includes Income from Business, Income from Capital Gain which includes Income from Business, Income from Capital Gain which includes Income from Business, Income from Capital Gain which includes Short Term Capital Gain on Sale of Shares and Income from Other Short Term Capital Gain on Sale of Shares and Income from Other Short Term Capital Gain on Sale of Shares and Income from Other Sources which includes Agricultural Inc Sources which includes Agricultural Income, Dividend, Interest on ome, Dividend, Interest on FDR with Bank and Bank Interest. FDR with Bank and Bank Interest.
We have not availed any credit facilities hence we do not have 13. We have not availed any credit facilities hence we do not have 13. We have not availed any credit facilities hence we do not have kisaan credit card. kisaan credit card.
Details of agriculture sales proceed in bank are enclosed.( 14. Details of agriculture sales proceed in bank are enclosed.( 14. Details of agriculture sales proceed in bank are enclosed.( Annexure-7) 15. Copy of bank statement to sup 15. Copy of bank statement to support the claim has been port the claim has been enclosed herewith. (Annexure enclosed herewith. (Annexure-8) E. As mentioned above, we have purchased agriculture land in E. As mentioned above, we have purchased agriculture land in E. As mentioned above, we have purchased agriculture land in year under reference and this is first year of agriculture income.” year under reference and this is first year of agriculture income.” year under reference and this is first year of agriculture income.”
5.4 We note that the assessee filed detailed responses in reply to We note that the assessee filed detailed responses in reply to We note that the assessee filed detailed responses in reply to the said notice, furnishing documentary evidence in support of its said notice, furnishing documentary evidence in support of its said notice, furnishing documentary evidence in support of its claim. It was submitted that the assessee had acquired 9.875 acres claim. It was submitted that the assessee had acquired 9.875 acres claim. It was submitted that the assessee had acquired 9.875 acres of agricultural land during the year under consideration and had of agricultural land during the year under consideration and had of agricultural land during the year under consideration and had engaged engaged local local farmers—possessing farmers possessing requisite requisite expertise—for expertise cultivation of crops, specifically ginger and tomato. A payment of tivation of crops, specifically ginger and tomato. A payment of tivation of crops, specifically ginger and tomato. A payment of ₹2,00,000/- was made towards maintenance of the crops, and was made towards maintenance of the crops, and was made towards maintenance of the crops, and harvesting as well as sale of the produce was undertaken through harvesting as well as sale of the produce was undertaken through harvesting as well as sale of the produce was undertaken through licensed vendors, with payments received via banking channels. licensed vendors, with payments received via banking channels. licensed vendors, with payments received via banking channels. The assessee furnished copies of land records, sale invoices, bank ssessee furnished copies of land records, sale invoices, bank ssessee furnished copies of land records, sale invoices, bank statements, confirmation from purchasers, and proof of expenses statements, confirmation from purchasers, and proof of expenses statements, confirmation from purchasers, and proof of expenses incurred, in support of the agricultural activity. incurred, in support of the agricultural activity. The assessee also The assessee also submitted that this was the first year of agricultural operations submitted that this was the first year of agricultural operations submitted that this was the first year of agricultural operations and, therefore, no comparative data from previous assessment and, therefore, no comparative data from previous assessment and, therefore, no comparative data from previous assessment years existed. In our considered view, the details furnished by the years existed. In our considered view, the details furnished by the years existed. In our considered view, the details furnished by the assessee were not only responsive to the qu assessee were not only responsive to the queries raised but were eries raised but were also supported by verifiable documentation. Thus, the finding of the also supported by verifiable documentation. Thus, the finding of the also supported by verifiable documentation. Thus, the finding of the Learned PCIT that no or inadequate inquiry was conducted by the Learned PCIT that no or inadequate inquiry was conducted by the Learned PCIT that no or inadequate inquiry was conducted by the Assessing Officer is factually untenable and contrary to the record. Assessing Officer is factually untenable and contrary to the record. Assessing Officer is factually untenable and contrary to the record.
The next issue that arises for c The next issue that arises for consideration is whether the onsideration is whether the income declared by the assessee qualifies as "agricultural income" income declared by the assessee qualifies as "agricultural income" income declared by the assessee qualifies as "agricultural income" as defined under Section 2(1A) of the Act. The said provision defines as defined under Section 2(1A) of the Act. The said provision defines as defined under Section 2(1A) of the Act. The said provision defines agricultural income to include, inter alia, any income derived from agricultural income to include, inter alia, any income derived from agricultural income to include, inter alia, any income derived from land situated in India land situated in India and used for agricultural purposes, whether and used for agricultural purposes, whether by way of rent or revenue or from the performance of agricultural by way of rent or revenue or from the performance of agricultural by way of rent or revenue or from the performance of agricultural operations on such land. operations on such land. 6.1 The Hon’ble Supreme Court, in The Hon’ble Supreme Court, in CIT v. Raja Benoy Kumar CIT v. Raja Benoy Kumar Sahas Roy [(1957) 32 ITR 466 (SC)], laid down the cardinal [(1957) 32 ITR 466 (SC)], laid down the cardinal [(1957) 32 ITR 466 (SC)], laid down the cardinal principles principles principles governing governing governing what what what constitutes constitutes constitutes agricultural agricultural agricultural income, income, income, emphasising that basic agricultural operations such as tilling, emphasising that basic agricultural operations such as tilling, emphasising that basic agricultural operations such as tilling, sowing, watering, and harvesting, and subsequent operations like sowing, watering, and harvesting, and subsequent operations like sowing, watering, and harvesting, and subsequent operations like weeding and tending to crops, are integral components. In g to crops, are integral components. In g to crops, are integral components. In Smt. Sarifabibi Mohmed Ibrahim v. CIT Sarifabibi Mohmed Ibrahim v. CIT [(1993) 204 ITR 631 (SC)], it was [(1993) 204 ITR 631 (SC)], it was held that the determinative test is the actual user of land for held that the determinative test is the actual user of land for held that the determinative test is the actual user of land for agricultural purposes and not merely the ownership thereof. agricultural purposes and not merely the ownership thereof. agricultural purposes and not merely the ownership thereof. Further, the decision of the Hon’ble Patna High Court in n of the Hon’ble Patna High Court in n of the Hon’ble Patna High Court in CIT v. Raja Raghunandan Prasad Singh [(1944) 12 ITR 375 (Pat)] clarifies that [(1944) 12 ITR 375 (Pat)] clarifies that Raghunandan Prasad Singh income earned merely by purchasing standing crops and reselling income earned merely by purchasing standing crops and reselling income earned merely by purchasing standing crops and reselling them would not qualify as agricultural income, in the absence of them would not qualify as agricultural income, in the absence of them would not qualify as agricultural income, in the absence of any cultivation activity. ion activity. 6.2 However, in the present case, the assessee has demonstrably However, in the present case, the assessee has demonstrably However, in the present case, the assessee has demonstrably established that cultivation was carried out established that cultivation was carried out—albeit not personally, albeit not personally, but through hired labour and local farmers engaged for this but through hired labour and local farmers engaged for this but through hired labour and local farmers engaged for this purpose. The settled law, as reiterated in purpose. The settled law, as reiterated in Raja Benoy Raja Benoy Kumar Sahas Roy (supra), is that it is not essential for the assessee to perform the (supra), is that it is not essential for the assessee to perform the (supra), is that it is not essential for the assessee to perform the agricultural operations personally; it is sufficient if such operations agricultural operations personally; it is sufficient if such operations agricultural operations personally; it is sufficient if such operations are carried out under his supervision through hired labour or are carried out under his supervision through hired labour or are carried out under his supervision through hired labour or agents. 6.3 The records reveal that the a The records reveal that the assessee not only owned the land ssessee not only owned the land but also actively participated in the agricultural process through but also actively participated in the agricultural process through but also actively participated in the agricultural process through engagement of labour, and has provided evidence of sale of the engagement of labour, and has provided evidence of sale of the engagement of labour, and has provided evidence of sale of the agricultural produce and corresponding receipts. In this view of the agricultural produce and corresponding receipts. In this view of the agricultural produce and corresponding receipts. In this view of the matter, the agricultural matter, the agricultural activity undertaken by the assessee activity undertaken by the assessee satisfies the legal test prescribed under Section 2(1A) of the Act. satisfies the legal test prescribed under Section 2(1A) of the Act. satisfies the legal test prescribed under Section 2(1A) of the Act. 6.4 The conclusion drawn by the Learned PCIT that no The conclusion drawn by the Learned PCIT that no The conclusion drawn by the Learned PCIT that no agricultural activity was undertaken by the assessee is therefore not agricultural activity was undertaken by the assessee is therefore not agricultural activity was undertaken by the assessee is therefore not borne out by the material on reco borne out by the material on record and is contrary to the legal rd and is contrary to the legal principles laid down by the Hon’ble Supreme Court and various principles laid down by the Hon’ble Supreme Court and various principles laid down by the Hon’ble Supreme Court and various High Courts. The revisional jurisdiction under Section 263 cannot High Courts. The revisional jurisdiction under Section 263 cannot High Courts. The revisional jurisdiction under Section 263 cannot be invoked merely on the ground that the PCIT holds a different be invoked merely on the ground that the PCIT holds a different be invoked merely on the ground that the PCIT holds a different opinion on facts duly examined a opinion on facts duly examined and verified by the Assessing nd verified by the Assessing Officer.
In light of the foregoing discussion, we are of the considered In light of the foregoing discussion, we are of the considered In light of the foregoing discussion, we are of the considered view that the order passed by the Learned PCIT under Section 263 view that the order passed by the Learned PCIT under Section 263 view that the order passed by the Learned PCIT under Section 263 of the Act is legally unsustainable and is liable to be set aside. of the Act is legally unsustainable and is liable to be set aside. of the Act is legally unsustainable and is liable to be set aside.
Accordingly, the imp Accordingly, the impugned order passed under Section 263 of ugned order passed under Section 263 of the Act is hereby quashed. The grounds raised by the assessee are the Act is hereby quashed. The grounds raised by the assessee are the Act is hereby quashed. The grounds raised by the assessee are allowed.
In the result, the ap In the result, the appeal of the assessee is allowed. peal of the assessee is allowed.